Life Insurance Can Help Pay for Long-Term Care Needs

Medicare, Medicaid and other retiree health plans typically will not cover the expense of long-term care (LTC). It’s important to talk to your clients and assess their LTC needs, so that together you can create a financial plan to help prepare them for the costs they may face. For clients with a life insurance need, consider a life insurance policy with an LTC Rider.

Take advantage of Long-Term Care Awareness month to talk to your clients about their plans for handling an LTC event. Many people wait too long before discussing their LTC preferences and options and risk having to make decisions quickly and under the duress of an immediate need. Show them how an LTC rider can help them alleviate the potential financial, emotional, and physical burden that they and their loved ones could face if such need arises.

The subject of  LTC can make many people uncomfortable because it is equated with a nursing home. However, having the LTC conversation allows families to get on the same page regarding who will provide care, where care will be provided and how it will be paid for. Waiting until an LTC event occurs to force the issue often results in limited options.

Asking “What if?” questions is a great way to get the conversation started and encourages them to think ahead about what LTC actually involves. For most, LTC will begin at home with the help provided by family members and friends. At some point, care can progress to options outside of the home.

In a recent study by the AARP Policy Institute, half of caregivers reported they had no choice in taking on their care giving responsibilities. Proper planning can help ensure that your client's retain the power of choice in an LTC scenario. It’s especially important for couples to anticipate the cost of care for an ailing partner and preserve options for the surviving spouse’s continued living expenses and LTC needs.

LTC planning shares similarities with many other client needs you already address. Starting the conversation early allows for better options to your clients, which leads to more satisfaction and referrals.

Using Life Insurance to Pay for Long-Term Care

Opinions differ on whether an Acceleration Rider on a life insurance policy is an adequate substitute for a separate LTCI policy or not. The answer depends, in part, on the size of a life insurance policy, the money received while the policy is in-force to pay long-term care costs, and how much long-term care is expected to cost at the time it's needed.

66% of Americans surveyed say long-term
care planning is important, but only 20%
have discussed the topic with an advisor 

If you do the math, you'll discover that an LTC Rider on a life insurance policy won't cover all of  the possible long-term care expenses. In fact, it may give a false sense of security that all needs would be met. And keep in mind that long-term care benefits received will reduce a policy's death benefit, possibly leaving little or nothing for beneficiaries.

However, the premiums on a stand-alone LTCI policy can be very costly, depending on current age, health, and the benefits offered. If these costs make such a policy too expensive, an LTC Rider on a life insurance policy may be a reasonable middle-ground solution. An LTC Rider can allow for tapping into the funds in the future, should the need for long-term care arise. 

For help in assessing your clients' personal situation, consider these Agent Resources.